The Minister of Finance is kind of beneficiant. The brand new protection finances is touted as the primary double-digit enhance in India’s protection spending in many years, after it has steadily declined since 2017. 2% of the finances alerts strategic resolve in an unusually turbulent world. Funds must be spent judiciously and shortly, and this requires modifications to the system, not tampering with the budgeting course of. As “frenemies” unfold and the tenuous “rule-based order” collapses, there is no such thing as a time for any respite.
good and dangerous factors
Most talked about is the proposed 15% enhance within the finances, amounting to 2% of GDP (up from 1.9% final 12 months). Second, in a notable change, capital spending exceeded the income finances, growing by greater than 22%, reversing years of neglect. Third, there’s a clear drive in the direction of modernization. The Indian Air Pressure has seen a hefty 32% hike, whereas the Indian Military has seen a 30% hike in heavy automobiles and weapons.
Curiously, the Indian Navy, which has formidable initiatives within the Indian Ocean, will get 3%. Mockingly, that is in all probability resulting from profitable indigenization and a confirmed capacity to soak up allotted funds.
That is all good. Nonetheless, the rupee has depreciated considerably towards the greenback, that means that funds for capital items equivalent to plane have gotten costlier. It is not all dangerous information. Protection exports are growing and stood at Rs 23,000 billion final 12 months as towards Rs 1,000 billion in 2014. A few of the Indian Military’s maneuver gear is manufactured right here by Tatas, Ashok Leyland and others. However this impacts “double digit” will increase.
Though pension funds have elevated by 6.56%, they continue to be at 21.84% in comparison with the Ministry of Defence’s (MoD) capital expenditure allocation of 27.95%. Previous to the 1987-88 fiscal 12 months, they have been eligible for central authorities pensions and weren’t allotted from the protection finances. Nonetheless, the finances was nonetheless 3.31% of GDP. Though the economic system at the moment was lower than half the dimensions of right this moment, it nonetheless presents some perspective.
Possibly it is time to reinvent that wheel.
paperwork and delay
What’s welcome is that 75% of the capital procurement finances for procurement has been allotted to home business, together with non-public corporations. The federal government’s push on this route has been constant, with protection manufacturing recording a 174% bounce from 2014 to 2015. However past that lies the truth of a fancy bureaucratic system, one side of which is L-1 (lowest price) guidelines that favor massive industries over the innovators important to technology-intensive industries. You’ll be able to’t compete, particularly should you transfer into manufacturing. This requires readability not solely concerning the info you will have, but in addition about your future plans and dedicated portions.
That is the subsequent issue. Infinite delays of essential packages equivalent to Submarine Undertaking 75, which was authorised in 1997. Anticipated supply dates are at present within the mid-2030s. The Rafale fighter jet deal, conceived within the Nineties, lastly got here to fruition in 2019-2020. It’s due to this fact not stunning that the Ministry of Protection needed to return Rs 12,500 crore of its capital allocation in 2024-25.
The time has come to rethink the repeated requires an unspentable protection modernization fund introduced within the 2004-2005 finances speech however by no means realized. The protection business can’t be held hostage by financial expediency.
Analysis and improvement is distributed
A key space is analysis and improvement (R&D). Funding for the Protection Analysis and Growth Group (DRDO) and a lot of analysis institutes has been elevated. Many have potential advantages for protection manufacturing. Nonetheless, analysis is fragmented. Regardless of being typically dual-purpose, it hardly ever results in improved defensive capabilities. India’s total analysis finances stays at 0.66% of GDP. Evaluate that with Japan’s 3.70%, which is primarily funded by the non-public sector. Personal sector analysis and improvement is sort of non-existent in India. Main League Baseball officers must loosen up and unify their analysis and route.
“Pacifist” nations like Japan at present allocate 2.2% to protection. The identical goes for Australia, which has a a lot decrease risk profile. Europe can also be transferring in the direction of bigger allocations. The issue right here is viewing the protection finances via a “weapons vs. butter” lens. As a substitute, it must be merged with the imaginative and prescient of Vikshit Bharat’s $30 trillion economic system. For instance, the Border Roads Group offers connectivity for its Vibrant Villages program, which is crucial for border improvement.
As one other instance, the Prime Minister stated that the home shipbuilding business has a number of ancillary industries and has a 6.5 instances affect on employment. That is true virtually throughout the board. The finances have to be seen as a instrument for selling development, slightly than a “non-development” sector. As soon as that is carried out, the subsequent course of follows.
Dushyant Singh is a retired lieutenant common and at present the director of the Heart for Land Warfare Research (CLAWS). Tara Kartha is the Director of Analysis and Evaluation on the Heart for Land Warfare Research (CLAWS).
issued – February 6, 2026 12:08am IST
